AnalysisYara sees positive 2013 outlook for global fertilizer market

12 February 2013 14:55  [Source: ICIS news]

By Richard Ewing

LONDON (ICIS)--Global demand for nitrogen fertilizers such as urea and ammonia "strengthened significantly" during the second half of 2012 and into early 2013, fertilizer giant Yara International announced on Tuesday.

Worldwide fourth-quarter Yara fertilizer deliveries jumped 19% year on year to just over 5m tonnes, with urea sales up 52% to 1.3m tonnes versus 851,000 tonnes in the same period of the year prior, the Norwegian producer revealed, adding the sharp rise in urea shipments reflected "higher sales of Qafco urea in North America and Brazil". Qatar-based Qafco is a leading producer of urea and ammonia.

"Global urea demand was strong during the fourth quarter. In addition to capacity additions in Qatar and Vietnam, a record 4.3m tonnes were sourced from China, 2.7m tonnes more than a year earlier," Yara disclosed.

"Urea prices were relatively stable throughout the quarter. Compared to fourth quarter 2011, the average price FOB (free on board) Black Sea was 14% lower, mainly explained by a significantly lower Chinese export tax. Production curtailments in Egypt, a key exporter of granular urea, supported the market for this grade, and the average FOB price from Egypt was only 7% lower than in fourth quarter 2011."

Sales of Yara-produced nitrogen phosphorus potassium (NPK) compounds and blends climbed 21% year on year to 1.73m tonnes, while deliveries of Yara-made nitrates increased 23% to 1.26m tonnes from 1.02m tonnes in the same period of the previous year.

Turning to ammonia, the Oslo-headquartered company said the market "remained tight during the quarter, with pricing high enough to trigger some additional ammonia sales at the expense of upgrading into urea or nitrate products". "While demand weakness was seen both from phosphate and industrial customers, this was more than offset by supply reductions, most notably in Iran and Trinidad," the firm stated.

Including its share of production from joint ventures such as the Lifeco plant in Libya and Australia's Yara Pilbara Holdings Ltd, Yara's ammonia output totalled 1.79m tonnes in the final quarter of last year versus 1.72m tonnes in the final 13 weeks of 2011.

Describing the phosphate market's quarterly performance as having headed in a "weaker direction", Yara noted; "subsidy reduction and sharply higher prices for Indian farmers negatively impacted phosphate use and phosphate stocks in India are already high". It added: "As India normally represents roughly half of global diammonium phosphate (DAP) imports, reduced Indian demand is strongly felt in the phosphate market.

"While there was downward pressure also on phosphoric acid and phosphate rock, prices have declined comparably less, resulting in reduced upgrading margins from rock to DAP."

On a regional basis, fourth-quarter nitrogen fertilizer deliveries in Western Europe climbed 15% year on year, with imports up 26%. "After a cautious start to the season in the third quarter, season-to-date deliveries are 6% above last season, with imports 10% ahead," Yara said. "Fourth quarter US nitrogen deliveries are up by an estimated 7% on fourth quarter 2011, almost exclusively due to strong urea imports. Season-to-date deliveries are up by an estimated 4%."

Indian urea sales of 22.1m tonnes are "virtually unchanged" from the year-ago period, with production flat at 16.8m tonnes. "For the same period, India imported 7m tonnes, up from 6.4m tonnes last year. After a slow start due to a late monsoon earlier in the year, India imported 3.9m tonnes during the quarter, up 30% on a year earlier.

"Due to strong global demand, and lower export tax, Chinese urea exports reached 4.3m tonnes during the quarter, up from 1.6m tonnes a year earlier. Urea production during the fourth quarter is a reported 2.6m tonnes higher than same quarter last year, helped by lower production costs, better feedstock availability and increased capacity. Domestic urea prices were on average 4% lower than a year earlier," Yara said.

Switching the spotlight to Latin America, Yara said sales of all nutrients to Brazil climbed to 8.2m tonnes from 7.9m tonnes in the same period of 2011. Annual sales to Brazilian farmers and agricultural users rose to 29.5m tonnes from 28.3m tonnes in 2011.

"Urea imports were 1.2m tonnes during the [fourth] quarter [in Brazil], up 17% from fourth quarter last year," Yara said. "For the year, 2.9m tonnes have been imported compared with 3m tonnes in 2011, the reduction explained by higher opening stocks."

Turning to the year ahead, Yara concluded: "The global farm margin outlook and incentives for fertilizer application are strong. The FAO [Food and Agriculture Organization] food price index is at the same level overall as a year ago, with cereal prices 13% higher reflecting tighter supply in several regions.

"The US Department of Agriculture (USDA) estimates that global grain stocks-to-use will decline by 8% during the 2012/13 season, underlining the continued long-term challenge of increasing agricultural productivity. Global nitrogen demand has strengthened significantly during the second half of 2012 and into 2013, balancing the strong increase in supply from China."

Earlier on Tuesday, Yara announced a 36% year-on-year slide in fourth quarter net profit to Norwegian kroner (NKr) 2.17bn (€294m, $393.8m), due in part to lower product prices.

($1 = €0.75, $1 = NKr5.51, €1 = NKr7.38)

By: Richard Ewing
+44 208 652 3214

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